As the economy grows and interest rates continue to drop, the Swiss National Bank is poised to lower its threshold to even lower negative interest rates. The new band of -.75 percent for the Libor interest rate is one indication that the SNB is prepared to go further. Moreover, negative interest rates will be effective from 3 December 2015. If the ECB follows suit, it may cut its rate from -0.2% to -0.3%. The move towards more positive interest rates will be especially difficult to swallow when the ECB’s announcement on 3 December takes place.
The SNB’s decision to go even negative is based on a desire to maintain price stability and to support the Swiss economy. As such, the SNB must protect negative rates from competition. While this policy has caused much opposition in Switzerland, it is still deemed necessary. The Swiss Bankers‘ Association has condemned the SNB’s policy.
The SNB’s monetary policy is based on the -0.75% range, which is below the zero lower bound. The SNB needs to keep negative rates low in order to maintain price stability and support the Swiss economy. However, as these negative rates are already in place, they have generated increasing opposition in Switzerland. The Swiss Bankers‘ Association has criticized the SNB’s rate policy and suggested that it was unnecessary and dangerous.